This is the third in our three-part series on the critical importance of the Requests for Production of Documents that as a divorce attorney you send to opposing counsel so as to gain financial information about your client’s spouse. After discussing RFPs in general, we next discussed the personal documents you should request. Today we discuss the business entity documents you need if your client’s spouse has an ownership interest in one or more businesses. Once you receive them, your CFL Designation for Divorce Practitioners gives you the advanced financial knowledge necessary to fully comprehend and analyze them.

All of these personal and business entity documents are especially important when your client is half of a high net worth couple. As with the personal documents, the AACFL has devised a business entity checklist to help you remember all the business documents you should include in your RFPs. You can download this checklist for free. It was designed by lawyers and forensic accountants specifically for use by practicing attorneys.

Partnership or Shareholder Interest

The whole purpose of including business entity documents in your RFPs is to determine what your client’s spouse actually owns and the value thereof. Consequently, you need such documents as the following:

  • Stockholders agreement or partnership agreements
  • Schedule of distributions and loans
  • Buy/sell agreements
  • Business valuation and/or appraisal reports

Keep in mind that business valuation is a highly complicated procedure and the bottom line figure can change based on the valuation approach used. The three most common approaches are:

  1. Asset-based approach
  2. Earning value approach
  3. Market value approach

Each of these approaches has its own advantages and disadvantages and again, your CFL Designation for Divorce Practitioners stands you in good stead in terms of giving you the necessary advanced financial knowledge to understand and analyze all three approaches.

Fixed Assets

One of the most important asset categories of any business entity is its fixed assets; i.e., its assets that cannot easily be liquidated. These include such assets as the following:

  • Land
  • Plant
  • Equipment
  • Copyrights, patents, and trademarks
  • Furniture, office equipment, computers, etc.

Businesses usually list their fixed assets on their balance sheets below their current assets. Naturally many of these assets depreciate in value over time. Consequently, they are originally listed at their initial cost and then depreciated over their useful lives until they reach their residual value, aka their salvage value. The business lists each asset’s annual depreciation amount as an expense.

Off-balance Sheet Liabilities

Another important document you should request in your RFPs is a schedule of off-balance sheet liabilities that will give you needed information as to the business’ current and potential financial obligations such as the following:

  • Guarantees
  • Leases
  • Lawsuits
  • Insurance settlements

In addition, businesses often finance their major purchases by means of off-balance sheet arrangements.

Your free AACFL business entity checklist includes these and many additional documents you need to request from opposing counsel in your Requests for Production of Documents. For more information on financial issues you need to be aware of, how gaining your CFL Designation for Divorce Practitioners will give you the financial knowledge and skills you need to attract additional high-asset clients, and the other benefits of AACFL membership, please visit this page of our website.